Things To Consider When Deciding Where To Live After You Retire
Thinking through your future plans and needs now can help you make a better buying decision. Here are some things to consider when looking at your retirement housing options:
- What sort of lifestyle do you want in retirement? Some people can’t wait to join an active retiree community where they can focus on their hobbies. Others crave a quiet rural life with their garden. Or maybe you imagine yourself traveling the world and need a low-maintenance home. Think about the lifestyle you want to enjoy during retirement so you have a better idea about the type of housing you need.
- What will your income be in retirement? If you’ve already retired, you have a good idea what your monthly income is. If you haven’t retired yet, you may want to talk with a financial advisor to determine the income you can reliably expect to bring in. This will help you determine how much home you can afford in retirement. Even if youre paying for a property outright, you’ll still have expenses such as maintenance, HOA fees, taxes and insurance to cover.
- What care needs are you likely to have in the future? It’s impossible to predict the future when it comes to your health. However, you’ll want to consider how your needs may change as you get older. You may want to live in a property that suits those needs now or can be easily retrofitted when needed.
Where Are Mortgage Rates Headed
Mortgage rates plunged early in the pandemic and scraped record lows below 3 percent at the start of 2021. The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 6 percent in 2022.
Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far, says McBride. The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.
What Mortgages Can A Pensioner Get
Some types of mortgage are aimed specifically at older people. Here are the main ones.
Retirement interest-only mortgages these work in a similar way to standard interest-only mortgages in that you only pay the interest each month. However, you only repay the outstanding balance once you die, go into long-term care or sell the house.
Lifetime mortgage this is a type of equity release that lets you borrow a lump sum secured against your home, which you repay when you die, move into your long-term care or sell the house. You pay interest on the amount you borrow, which will either compound over time to a lump sum you pay at the end or you may be able to pay it off as you go to avoid it increasing. Find out about the pros and cons of equity release.
Older Peoples Shared Ownership this government-backed scheme isnt a traditional mortgage, but it does offer a way for pensioners to buy a home. It allows you to buy a portion of a property and pay rent on the remainder. You can only buy up to a 75 per cent share, and once you reach this threshold, you wont pay any more rent.
Home Ownership for People with Long-Term Disabilities just like OPSP, HOLD is a shared ownership scheme. It lets you apply for properties that meet your needs if there arent any available through OPSP.
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Yes You Can Buy A Home In Retirement
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You may have heard stories of upcoming retirees who, planning to move after retirement, locate a new home and take out the mortgage before they actually retire. They think that once they are retired, they wont be able to get a mortgage.
You dont have to do it that way. You can get a mortgage once you are retired.
Refinance & Mortgage Guide For Senior Citizens
This guide has been created with the sole purpose of guiding the older members of society and senior family members through the sometimes cumbersome process of purchasing and maintaining real estate. Whilst aimed at a specific demographic, this guide is freely accessible to anyone and everyone looking to get informed on the steps and processes involved in getting onto the property ladder.
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Renting A Retirement Home
Some seniors may find it makes more sense for their lifestyle and finances to rent a retirement home or apartment. Renting means you may not have to deal with maintenance issues. Renting can also give you more flexibility to move around. If you don’t already own a home, renting may be a better option.
Keep in mind that landlords can raise your rent or ask you to vacate, too. Renting can be less stable since owning a property could allow you to lock in a low monthly mortgage payment with a great interest rate.
- Pros: You’ll be able to move more easily and won’t have to worry about maintenance issues
- Cons: Doesn’t provide the same long-term stability as owning a home
Mortgages For Over 60s
Plenty of lenders offer mortgages for people over 60, but your options are likely to be more limited. For instance, many lenders offer shorter terms, so you need to repay the loan over 10 or 20 years.
You have a better chance of being accepted if you have a strong credit history and if your income is high enough to cover the mortgage repayments easily. Youll almost certainly be asked for proof that your pension payments will be enough to meet your mortgage repayments.
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How Does The Qualifying Process Differ When Buying A Retirement Home
The rest of the homebuying process will look a lot like it does for someone whos still working. You’ll need to make an offer on a property, qualify for the mortgage and attend the closing. Consider working with a lender who has experience working with retirees. Theyll know what your options are when it comes to qualifying for a loan, and be able to advise you about available mortgage options.
Buying a home at any stage of life is a big commitment, but working with a Home Lending Advisor can help make the process easier.
Who Provides Subordinate Loans
A bank or financial institution offers all types of loans, including subordinated loans. However, these loans can be obtained by any loan provider. A loan automatically becomes a subordinate loan if you acquire it while youre already repaying your primary loan. Thus, you can get a subordinate loan from any lender or financial institution.
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Can Senior Citizens Get Mortgages
Senior citizens can get mortgage loans just like everyone else it all depends on income, credit score, and cash available. Even seniors into their 90s can get mortgages if they qualify financially.
There are varying reasons for wanting a mortgage. Some seniors may want to downsize to a single-story home or a property that requires less upkeep or perhaps they want to be closer to family.
Some seniors even get mortgages to buy homes for their children who couldnt qualify for a loan.
No matter the reason, senior citizens are more than able to qualify for a mortgage. According to the Federal Trade Commission , elderly people are protected against discrimination from getting a home loan or any kind of credit based on their age. Its called the Equal Credit Opportunity Act, a federal law that protects borrowers against bias due to age, race, color, religion, national origin sex, marital status, or even those who get public assistance.
This means that all seniors are eligible to buy a home if they can qualify.
When Does It Make Sense To Get A Home Loan As A Senior
Many retirees and seniors are opting to have a mortgage instead of paying off their loan balance or buying a new home with cash.
This can free up savings for other uses. Necessities such as food, transportation, and long-term care are among the highest expenditures for seniors.
Other than freeing up assets, there are a number of reasons seniors may be considering financing a new home purchase.
- Sizing down: Empty nesters may size down to minimize square footage, maintenance, and mortgage costs
- Physical challenges: Cleaning and repairs can become physically taxing. Many seniors purchase a new home to cut down on upkeep
- Supplementing fixed income: More and more senior citizens are finding it difficult to live on their fixed incomes. Retirees may decide to sell or refinance their homes, finance a new home purchase, and use the equity cashed out to supplement their income
- Moving to a new area: According to one survey, as many as 40% of retirees are venturing out of their home state looking for better weather, recreation, favorable taxes, and other benefits
If any of the above applies to you, it might be worth it to consider financing a home in retirement.
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Chapter 5 Facts About Senior Citizen Mortgages
What you should know
Chapter 8 Final Tips & Warnings
Senior citizens are allowed special discounts and assistance from a variety of resources. The best-case scenario would be for a senior to be able to have an affordable mortgage and sufficient income to allow them to remain in their home as long as they desire, while also being able to pay all monthly bills without undue stress over finances.
When a senior has a home fully paid for or almost paid for, they are in a good position to extract needed cash from that home if necessary. Popular options today are the reverse mortgages or mortgage modification programs. Home equity that has been built up by the homeowner can be partially withdrawn to meet current and future needs of the senior citizen. Pre-planning for retirement and housing needs is essential as people are living longer while economic pressures continue to escalate for everyone, including senior citizens.
Mortgage modifications can result in savings experienced by some seniors, including saving 35% on mortgage payments or reducing monthly payments by hundreds of dollars. With these possibilities, remaining in their comfortable home environment is a reality for many seniors who are willing to obtain the needed financial instruments. New mortgages, refinancing, reverse mortgages, home equity loans, home equity conversion mortgages, tax deferment programs and other financial tools are available to senior citizens, regardless of their advanced age.
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Which Lenders Offer Mortgages To Older Borrowers
Depending on your age, you should be able to get a mortgage with a wide range of providers. For instance, most lenders will consider applicants under 60 for the same deals they offer younger borrowers. If you are older than that, you may find that you have a more limited range of offers and only have access to shorter-term mortgages or higher interest rates.
You can use our comparisons to find mortgages that may accept you if you are over 50 or over 60. You might also want to consider specialist lenders with products aimed specifically at older borrowers. A broker can help you find the right lender for your circumstances and may get you a better deal.
Can An Elderly Person Get A Mortgage
Senior citizens can get mortgage loans just like everyone else it all depends on income, credit score, and cash available. … Some seniors even get mortgages to buy homes for their children who couldn’t qualify for a loan. No matter the reason, senior citizens are more than able to qualify for a mortgage.
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Getting A Mortgage When Youre Older
Getting a mortgage when youre older is gradually becoming easier as the UK mortgage market adapts to an ageing population that is retiring later in life.
Thanks to high property prices and rising student debt, many people are buying their first home much later in life. Increasing numbers also want mortgage terms that last longer than the traditional 25 years. When taken together, these trends mean that more people will be in their 60s, 70s or even 80s before repaying their mortgage.
This guide highlights which lenders have the highest mortgage age limits, explains how to increase your chances of getting a mortgage as an older borrower, and offers some alternative options to consider.
How Do I Qualify For A Home Loan For Seniors/retirees
As mentioned earlier, your age has no bearing on your ability to apply for a loan. Lenders consider the same criteria when reviewing the loan application of a 30-year-old as they do a 65-year-old. Those criteria are:
- Your income and total assets
- Your credit history and credit score
- Any outstanding debts you may have
As you can imagine, it may be tougher for a senior or retiree to meet these criteria considering their limited fixed income. But its not impossible.
You can find home loans for seniors on Social Security as long as your monthly income meets the lenders requirements.
Lenders simply want to make sure you can repay the loan. If your Social Security income, pension income, and retirement accounts meet the lenders requirements you should have no problem finding home loans for seniors on Social Security.
In some cases, senior citizens on the verge of retiring can even consider pension-advance loans to get cash now in exchange for a percentage of the borrowers future pension payments.
However, many experts advise against this.
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Should I Choose A Traditional Mortgage Or A Home Equity Line Of Credit Or A Reverse Mortgage
After explaining that a retired person can qualify for a home and going over the details like I have here. The next question revolves around the options.
You have all the options and choices that an employed person would have, plus one extra. You can set up a traditional mortgage with principle and interest payments. You can set up a home equity line of credit. You can set up a second mortgage.
If you have bad credit, you can set up a mortgage through an alternate lender who is more flexible regarding credit. In addition to all of these, you can also set up a reverse mortgage.
I explain how reverse mortgages work, in much more detail, in another article on this site. Click here to read this article, “How does a reverse mortgage work?“
Once you turn 55, you can qualify for a reverse mortgage. Two lenders in Canada offer Reverse Mortgages. The amount of the mortgage is calculated based on the equity in your home, your location, and your age. The lenders give more “weight” to your home than to your income or credit.
You can access the equity in your home up to 55% of your home’s value. You do not have to make minimum payments. You do not have to pay it back until your home is sold.
Tips For Getting A Mortgage
- A financial advisor can help you get your financial house in order before you apply for a home loan. This may include setting a budget, saving for a down payment and analyzing your monthly expenses. Finding a qualified financial advisor doesnt have to be hard. SmartAssets free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If youre ready to find an advisor who can help you achieve your financial goals, get started now.
- Speaking of setting a budget, SmartAssets mortgage calculator can help you estimate how much your monthly payment will be based on the price of the home and the size of the loan youre getting from a lender.
- Before selecting a lender, be sure to shop around for a low interest rate. SmartAssets mortgage comparison tool will help you assess your options on the market and hopefully find a lender that suits your needs.
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Mortgages For Over 70s
Once you hit 70, your options for getting a mortgage become substantially more limited. Fewer lenders are prepared to offer you a loan, and they are likely to offer shorter terms and higher interest rates.
Specialist lenders could be an option for mortgages for people over 70, and its also worth investigating what building societies can offer. You could also consider other options, such as a guarantor mortgage.
